Will Govt Banks post profits as Private banks did amidst pandemic?


There is a saying in financial markets now that any company posting profit of even Rs.1 crore is a great company. How you got profit is not our concern? Whether profit is posted or not? This applies to all Govt and Private banks as well.


The Rating companies warned repeatedly that NPAs will increase due to failure of many activities like Airlines, big hotels, Tourism related activities, Chain of Cinema theatres by big corporates, TV news channels, Entertainment media, Print media, Function halls, big cine producers, production houes, Real Estate sector etc.

Yesterday RBI Steady paper on indian Banks also warned that NPAs may increase to 12% to 14% due to present pandemic situation. So who ever posts profit this year is a Hero, whether it is manufacturing or trading or service sector. Stock market is not reflecting the true picture of Indian Economy, as I wrote in my earlier column. As only RIL and Pharmaceutical companies are dominating the number game there.

Four Private Banks came forward with quarter one results ending June 30, 2020. SBI declaring results this month end which will be followed by other Govt banks. Let us see one by one.

A) HDFC Bank

  1. The deposits of HDFC bank stood at Rs.11,89,387 crore with 24.6% growth compare to June 30, 2019.
  2. Advances were Rs.10,03,299 crore on 30-6-2020 with 20.9% growth compare to June 30, 2019.
  3. Net profit after Tax for quarter ended June 30, 2020 was Rs.6658.62 crore as against its last year first quarter of Rs.5568 crore.
  4. Provisions for NPA loans increased to Rs.1151.7 crore for Q1 of 2020-21 compared to Rs.365.74 crore of Q1 of 2019-20.
  5. Capital Adequacy Ratio was 18.9% highest in all Indian banks.
  6. The other income apart from interest income declined to Rs.4075.30 crore for Q1 of 2020-21 compared to Rs.4970 crore during last year Q1.

Generally any bank posts equal or 50% of other income such as processing charges, penalties, Locker rents etc as profit is a very good bank. The net profit for Q1 of 2020-21 Rs. 6658.62 crore was more than the other Income of Q1 of Rs.4075.30 crore.

Notable thing is that Founder and CEO Aditya Puri is retiring in next October end after 30 years dynamic leadership. Puri has sold 95%of his own shares of his beloved bank for Rs.843.20 crore. He also sold shares of his subsidiary company HDB financial for Rs.200 crore only to have profits that will make post-retirement life happy and hassel free. Indeed a clever move.

B) ICICI bank

As many analysists feel, I also feel that after the departure of Mrs. Chanda Kochhar, as MD, this bank is loosing its dynamism to a great extent and showing average performance. But to all our dismay it has posted a net profit of Rs.2599 crore for the 2020-21 quarter ending which was 36% above compared to last year first quarter.

The net profit is posted after selling 3.96% stake in ICICI Lambord Assurance for Rs.2250 crore and 1.50% stake sale in ICICI Pru Life insurance for Rs.840 crore. Just like SBI did lost year posting profits by selling stake in SBI cards and SBI Life .

Otherwise there would have been a loss of Rs.493 crore for first quarter of 2020-21.


  1. The main reason for net profit (loss) was Fee income other than interest income fallen to Rs.2104 crore which was at Rs3039 Crore last year in same period.
  2. As advances growth was only 7% compared to last year quarter one. So processing charges fallen drastically.
  3. NPA fresh addition during Q1 of 2020-21 was Rs. 1160 crores. Provision for bad loans increased hugely to Rs.7594 crore (Rs.3496 crore Q1 2019-20). Thus forced the bank to sell stake in subsidiary companies.
  4. Deposits have ICICI bank on 30-6-2020 were Rs.801,622 crore with a growth of 21% compared to corresponding period last year. For this management needs appreciation.
  5. Advances growth was sluggish at 7%. Advances were Rs 631,215 crore on 30-6-2020 compared to Rs.592,415 crore on 30-6-2019. Actually advances reduced from Rs.645,290 crore on 31-3-2020. The reasons were not disclosed.

In the press meet yesterday ICICI bank declared that they are planning to sell 4% stake in ICICI Securities. So next quarter also it may post book profit like first quarter.

C) Axis Bank

Axis bank needs appreciation for its Digital India initiative with first rank in Banking sector ahead of other private banks and SBI.

For first quarter of 2020-21 Axis bank share in UPI payment was 19% with 672 million paynents amounting to Rs.66,160 crore. 75% of fresh fixed deposits were entered through Digital channels, that means Tech customers have preferred this bank in all major cities.

To be a financial super bazar, the Axis bank tied up with Max Life insurance a joint venture. Also started Wealth Management for 986 super Rich families generating good fee income.

Axis has the highest number of 5485 cash deposit and withdrawal machines which is another record as on date. Customers visiting branches have been reduced by 20%.

  1. Net profit for Q1 2020-21 came down by 19% to Rs.1112 crore which was at Rs.1370 crore for Q1 in 2019-20. This is without selling any stake in subsidiary.
  2. Operating profit reduced just 1% only at Rs.5844 crore which was at Rs.5893 crore for Q1 in 2019-20. Good performance by any standard.
  3. Provision for bad loans increased marginally to Rs.3512 crore when compared to Rs 2886 crore last year at Q1.
  4. Deposits have increased by 16% at Rs.628,150 crore this Q1 as against the deposits of Rs 540,678 crore last year Q1.
  5. Advances increased by 13% at Rs.561,341 crore this quarter where as it was at Rs 497,276 crore last year Q1.
  6. The only aberation was loan to deposit ratio was 89%. The plus point was Retail loans upto Rs.5 crore was stood at Rs.298,636 crore and Rs.57,148 crore for MSME sector on July 30, 2020.
  7. Though fee income reduced by 33% in Q1 of 2020-21 to Rs.2587 crore bank shown better performance in first quarter of 2020-21.
  8. CASA of all three private banks above are 40% minimum .

D) Federal Bank

  1. Federal bank net profit came down by 22.5% for Q1 of 2020-21 to Rs.302.95 crore. It is a good performance in the given situation. Though fee income reduced Bank posted net profit in a cut throat competition and pandemic situation.
  2. Deposits growth was good at 17% to Rs.154,938 crore on 30-6-2020 as against Rs 132,537 crore last year same quarter. This also needs appreciation.
  3. Advances growth was 8% at Rs.123,085 crore on 30-6-2020 against last year’s Rs 113,717 crore for the same Q1.

This bank also started growth with profits regularly for last two years with only 1263 branches predominantly in Kerala and South India.

We have to wait and see the impact of merger of Govt banks on their balance sheets as on June 30, 2020 which is expected in a week’s time.